Let Gregory James Company, Inc. help you determine if you can get rid of your PMI
A 20% down payment is usually accepted when getting a mortgage. Since the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends predict declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Gregory James Company, Inc., we're masters at recognizing value trends in Cedartown, Polk County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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